RPC summarise the key changes to the FA's Regulations on Working with Intermediaries (the "Regulations"), and offer practical tips to agencies, clubs and players to manage their impact.
The FA's reforms to the Regulations, which are now in force for the 2019-2020 season, introduce obligations on clubs and intermediaries which aim to create more transparency when sharing information with the FA.
The Regulations were introduced on 1st April 2015, and replaced the existing licensing system for agents that had been in place for almost 25 years. Since then, the Regulations have been the subject of heavy criticism, including because they removed the requirement for intermediaries (previously licensed football agents) to pass exams or have insurance.
Intermediaries continue to be in the spotlight for the amount of money spent on agents' fees in recent transfer windows, with figures reportedly climbing to £260 million for the previous Premier League season. The increased revenues coincide with increased scrutiny from external regulators such as HMRC and the SFO on the structure and propriety of agents' fees. It is no surprise that there are now much more serious consequences where allegations of tax evasion and/or fraud are raised.
With intermediaries' influence understandably growing in the game, the FA has sought to balance the interests of various stakeholders in its changes to the Regulations. To summarise the key changes:
A. Increasing transparency
Making an Offer
New rules A8.1 and A8.2 require that intermediaries notify players both orally and in writing of all offers received as soon as possible or latest, within 24 hours of receipt of the offer.
The change gives clubs the advantage of knowing that all offers must be communicated to the player (without the intermediary being able to omit relevant information about the offer) – something that has been a source of player complaints in recent years.
Some in the market have voiced concerns that clubs may use the rule change to unsettle players and encourage them to hand in transfer requests. Whether this comes to fruition by causing specific issues in the forthcoming transfer windows remains to be seen.
According to the FA's Guidance Notes to the Regulations, an "offer" would include "proposed terms of employment, including fixed or continuing remuneration and term" and must also "comply with all relevant rules and regulations".
The offering club therefore needs to be relatively specific – more than informal suggestions of terms – in order to trigger the obligation on intermediaries. A practical tip to clubs is to ensure that offers are in writing, marked "Offer - subject to contract" (and private and confidential) to minimise the risk of disagreements regarding the new rules.
2. Annual financial reports
Rule C12 states that intermediaries must provide financial reports (annual returns) to their players which show all of the payments made by that player (or by a club on behalf of that player) to the intermediary during a season. The FA can also request to see these reports.
Some have complained of the time commitment this imposes on intermediaries, specifically because there are already requirements to disclose agents' fees and commissions in each transfer.
There is perhaps a wider impact of the rule change. The FA, intermediaries and agencies (and players themselves), continue to receive significant information/document requests from external regulators (eg HMRC). If intermediaries are forced to produce single annual statements on a per-player basis it would simplify analyses of the declarations made by intermediaries regarding the movement of monies involving agents' fees.
3. Disclosing agreements
Rule D5 creates a new obligation that any agreement reached between two intermediaries (or their companies) resolving an intermediary-related dispute must be disclosed to the FA.
It's not clear whether this change would encourage more disputes involving intermediaries – ultimately any disputes between relevant intermediaries would be aired before the FA in any event.
New rule E8(iii) also requires clubs to disclose to the FA agreements with intermediaries "of any nature" regarding the provision of services by the intermediary. Previously the obligation was only to file copies of representation contracts with the FA.
The broad language used by the FA appears to focus on capturing purportedly sham agreements entered into to avoid existing rules within the Regulations. The obvious example, which has given rise to a number of disputes and regulatory investigations previously, being sham "scouting services agreements" which aimed to circumvent restrictions on intermediaries' involvement in a transfer.
B. Fiduciary Duties
1. Best Interests
Rule A7 now requires an intermediary to always act in the best interests of the club and/or player for whom they act, and in accordance with their fiduciary duties.
This obligation has been commonplace in representation contracts for a long time. The rule change exposes intermediaries to prospective disciplinary proceedings by the FA if they fail to comply with their duties. The battleground over "acting in the best interests" between the FA and intermediaries is one to watch out for.
2. Approaching players under 18
Rule B8(ii) requires intermediaries to obtain the written consent of the player’s parent or guardian before approaching a player between 1 January of the year of the player’s sixteenth birthday and the date of his eighteenth birthday. Approaches are clarified as including communications made to the player across all manner of electronic communications, including WhatsApp and other social media accounts.
This is by far and away the most common offence giving rise to a suspension of intermediaries (including some of the best known faces in the industry) relates to interactions with young players.
There are obvious question marks about how "approach" is to be understood – but the practical response to ensure that intermediaries always seek parental permission before speaking to a young player about representing them.
Keeping records of conversations is also highly advised, either through screenshots of WhatsApp conversations or ensuring that WhatsApp conversations are backed-up regularly.
The new changes are important, but appear to be a precursor to anticipated wholesale reforms expected to be implemented in forthcoming seasons (any time from the start of the 2020/21 season). Those changes are likely to re-consider aspects such as licensing arrangements and caps / bandings for agents' fees.
The RPC Sports group has particular experience in disputes involving intermediaries' roles in player transfers, including acting for a high profile Premier League club in HMRC's football industry-wide investigation into agents' fees. For more information, please contact Josh Charalambous or your usual RPC contact.